Income Tax Appellate Tribunal - Hyderabad
Transport Corporation Of India Ltd., ... vs Addl. Cit, Range-2, Hyd, Hyderabad on 11 January, 2017
ITA No 188 of 2016 TCI Ltd Hyderabad
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ' A ' Bench, Hyderabad
Before Smt. P. Madhavi Devi, Judicial Member
AND
Shri S.Rifaur Rahman, Accountant Member
ITA No.188/Hyd/2016
(Assessment Year: 2010-11)
Transport Corporation of Vs Addl. Commissioner of
India Limited Income Tax, Range-2
Hyderabad Hyderabad
PAN: AAACT 7966 R
For Assessee : Shri Y. Ratnakar
For Revenue : Shri K.J. Rao, DR
Date of Hearing: 29.12.2016
Date of Pronouncement: 11.01.2017
ORDER
Per Smt. P. Madhavi Devi, J.M.
This is assessee's appeal for the A.Y 2010-11. In this appeal, the assessee is aggrieved by the order of the CIT(A) in confirming the penalty levied by the AO u/s 271G of the I.T. Act.
2. Brief facts of the case are that during the scrutiny proceedings in the case of the assessee for the A.Y 2010-11, the assessee was required to file the T.P. study maintained u/s 92D(3) r.w.r 10D of the Act. The AO observed that a request was made to this effect during the hearing dated 30.10.2012, but the report was not filed during the year and that during the hearing dated 30.03.2013, it came to the notice of the AO that no such study was maintained by the assessee even though the value of Page 1 of 6 ITA No 188 of 2016 TCI Ltd Hyderabad the transaction exceeded the time limit prescribed u/s 92D(3) of the Act. Therefore, penalty proceedings u/s 271G were initiated by way of issue of show cause notice on 31.03.2013 and levied penalty u/s 271G of the I.T. Act @2% of the international transaction. Aggrieved, the assessee preferred an appeal before the CIT (A) stating that no notice u/s 92D(3) was issued during the course of the assessment proceedings requiring the assessee to furnish the information and documents and therefore, the proceedings u/s 271G are not valid. The CIT (A) however, confirmed the penalty order and the assessee is in appeal before us.
3. The learned Counsel for the assessee has drawn our attention to the relevant provisions of law i.e. section 92D(3) and section 271G and the decisions of the Coordinate Bench of this Tribunal in the following cases:
i) Income Tax Officer vs. Netsoft India Ltd reported in (2013) 35 Taxmann.com 579
ii) ADIT (I.T) Ahmedabad vs. Nicco Resources Ltd reported in 36nTaxmann.com 378.
iii) Cargil India (P) Ltd vs. DCIT reported in 167 Taxman/110 ITD 616 (Del.).
He has also filed detailed written submissions on this issue.
4. The learned DR, on the other hand, supported the orders of the authorities below.
5. Having regard to the rival contentions and the material on record, we find that the penalty levied is u/s 271G of the Act.
Page 2 of 6ITA No 188 of 2016 TCI Ltd Hyderabad For the sake of ready reference, the relevant provision is reproduced hereunder:
"271G. Penalty for failure to furnish information or document under section 92D.--If any person who has entered into an international transaction fails to furnish any such information or document as required by sub-section (3) of section 92D, the Assessing Officer or the Commissioner (Appeals) may direct that such person shall pay, by way of penalty, a sum equal to two per cent of the value of the international transaction for each such failure.".
6. On a literal reading of the above provision, it is clear that the AO has to issue a notice under sub section 3 of section 93D of the Act requiring the assessee to furnish any information or documents and only on the failure of the assessee to furnish such information, can the AO or the CIT (A) initiate proceedings u/s 271G of the Act. Though the assessee has raised its specific objection before the AO as well as the CIT (A), both have failed to consider and adjudicate the said objection of the assessee. We find that the CIT (A) has only discussed about the issuance of notice u/s 271G of the Act and there is no discussion at all about the issuance of notice u/s 92D(3) of the Act. We find that similar issue had arisen before the Delhi Bench of the Tribunal in the case of Cargil India (P) Ltd (cited Supra) and the Tribunal at Para 32 to 34 has held as under:
"32. In the light of what we have discussed above relating to requirement of valid notice under section 92D(3) of the Act, above mentioned notices cannot be treated as valid and legal to justify application of provision under section 271G of the Act and levy of penalty of more than Rs. 40 crores. These are omnibus notices issued without application of mind and without considering documents already placed by the taxpayer on record and without consideration as to which of the specific clauses of sub-rule (1) or other sub-rules was attracted or which relevant information was needed in this case. Under section 92D(3), Assessing Officer or CIT (Appeals) is authorized to require prescribed information but here both prescribed and un- Page 3 of 6 ITA No 188 of 2016 TCI Ltd Hyderabad prescribed information like balance sheet, profit and loss account, computation of income etc. was also required to be furnished from the taxpayer before the taxpayer could file evidence under section 92CA(2). Not only primary documents necessary to support the computation of ALP of taxpayer, but also supporting documents detailed in sub-rule (3) of rule 10D were required to be furnished without considering which supporting documents out of several mentioned in various clauses of the said sub-rule were available with the taxpayer. The burden of selection/relevancy of clauses applicable was shifted to the taxpayer. The notice only increased burden of the taxpayer and confused the noticee. Above notices issued without application of mind and without considering relevancy and requirement of all the prescribed information and documents under rule 10D vitiated the legality of the notices. Above notices could not be treated as proper and legal notices in terms of section 92D(3) of the Act. The failure, therefore, of the taxpayer to comply such notices in time cannot justify levy of penalty of Rs. 40,46,41,376. The notice being illegal question of levy of penalty did not arise.
33. Apart from the decisions cited by Shri Agarwal, the learned counsel for taxpayer, our above view is supported by decision of Calcutta High Court in the case of New Central Jute Mills Co. Ltd. v. Dwijendralal Brahmachari [1993] 90 ITR 467 where a notice was issued by the ITO asking for production of all the books of account and documents of company lying in the custody of the Registrar of the Company. The Court found that books of account and documents summoned were not seized and not seen by the ITO and, therefore, the ITO had no knowledge and could not have any knowledge about the contents of books and documents nor could determine the relevancy or otherwise of said books and documents. The Court held that notice clearly suggested that ITO had not applied his mind before issuing the notice. It was also held to be vague and illegal. The notice was, therefore, held to be beyond statutory powers, illegal and quashed accordingly. The facts here are quite similar.
34. In the light of above discussion, we hold that three notices referred to above issued by the TPO could not be treated as valid notices issued in terms of section 92D(3) of the Act and, therefore, did not attract penalty provisions of section 271G of the Income-tax Act".
7. Since, it is not proved by the Revenue that a notice u/s 92D(3) has been issued to the assessee, respectfully following the above decision, we allow the assessee's appeal and set aside the penalty order u/s 271G of the Act.
Page 4 of 6ITA No 188 of 2016 TCI Ltd Hyderabad
8. In the result, assessee's appeal is allowed.
Order pronounced in the Open Court on 11th January, 2017.
Sd/- Sd/-
(S.Rifaur Rahman) (P. Madhavi Devi)
Accountant Member Judicial Member
Hyderabad, dated 11th January, 2017.
Vinodan/sps
Copy to:
1 Transport Corporation of India Ltd, 306 & 307, 3rd Floor, Ashoka Bhoopal Chambers, S.P. Road, Secunderabad 500003 2 Addl. CIT Range-2 Hyderabad 3 CIT (A)-9, Hyderabad 4 Pr. CIT - 2 Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order Page 5 of 6 ITA No 188 of 2016 TCI Ltd Hyderabad Page 6 of 6